Who Is In Control?!

From 6 April 2016 unlisted UK companies must take reasonable steps to ascertain and record in a dedicated register details of each individual who exercises control or significant influence over the company – known as persons with significant control, or PSCs. The details include the individual’s name, nationality, date of birth and address.

The definition of control seeks to capture all the ways in which an individual could exert significant influence or control, and includes direct or indirect control of 25% or more of the voting rights in the company. Some companies will not have any PSCs; others will have several. Individuals who are PSCs will be required proactively to notify the company concerned and provide their details to it. It will be a criminal offence for an individual not to comply with the new rules. This new regime will in effect replace the Annual Return.

The intention behind the introduction of this new regime is that the identity of individuals who really control UK companies and LLPs will be available to see on public record. For those overseas shareholders who have not realised that this measure is being introduced, this may come as something as a shock, particularly where they have been using ‘blocker’ entities and nominee arrangements to ensure that true ownership is hidden from public glare.

Accountants and lawyers will need to advise their clients of the need to consider how this new requirement impacts upon them and consider carefully what must be reported. Specifically advisers should draw to their client’s attention the criminal offence committed if the new rules are not complied with.

Of course these rules do not apply to non UK companies, and following the ‘Panama Papers’ controversy there will no doubt be further work (which was already ongoing) to ensure that the identity of owners of foreign companies with UK assets and interests is made public – in addition further measures will be put in place so that information related to the beneficial ownership of non UK companies by UK residents is shared between tax authorities and governments.

Notwithstanding, all accountants and lawyers will need to get up to speed very quickly with the new rules given that the submission of the confirmation statement (in replacement of the annual return) will begin on 30 June 2016, with companies and LLPs required to maintain a physical register from 6 April 2016 onwards.

Of course some interesting debates will now be had as to whether particular individuals (e.g. beneficiaries or settlors of trusts) are persons with significant control or not. There is a large amount of guidance written by HM Government (links below) and practitioners will need to begin to become familiar with this guidance as requests for advice from clients is likely to increase dramatically in the first year or two of this new regime.